Keeping Calm When the Storm Hits

Keeping Calm When the Storm Hits

Tim Fitzpatrick
Welcome to the Rialto Marketing podcast. Today's episode is a Revenue Accélération Series interview where we talk to seven-figure B2B business owners and their growth-focused executives who are actively trying to grow their businesses and get to the next level. We talk about the good, the bad, and the ugly so that you can learn from their experiences. Hi, I am Tim Fitzpatrick with Rialto Marketing, where we believe marketing shouldn't be difficult, and it definitely shouldn't be guesswork. Thank you so much for taking the time to tune in. I am super excited to have Mike Nastick with R3 with me today. Mike, welcome. Thanks for being here.

Mike Nastick
Thanks, Tim. I really appreciate the time. Looking forward to the conversation.

Tim Fitzpatrick
Yeah, me too, man. I'm looking forward to digging into this with you. Before we do that, I want to jump into some rapid fire questions. You ready to rock and roll?

Mike Nastick
Yeah, let's do it.

Tim Fitzpatrick
Okay. So very quickly, what do you do? How long have you been doing it?

Mike Nastick
So my role here at R3 is I head up the commercial sales team. We have a commercial and a federal arm. We're primarily commercial now, trying to get into the federal side. I head up the commercial side, focused on growth and acquisition and new clients and new business, new logos, if you will. So been here at R3 for going on seven years, been in the MSP world for over a decade now and have seen and been a part of the smaller one that we were before when I first started here at R3. And I've been a part of the big one. So I have a wide breadth of experience across the MSP space.

Tim Fitzpatrick
Love it. What's the most important lesson you've learned in your time at R3?

Mike Nastick
Sometimes you got to slow down to speed up, and sometimes you've got to look inward and adjust things accordingly. And it's about the people at the end of the day, and it's about the clients. We're a growing business, and we always say we're building the airplane while we're flying. So that comes with a lot of challenges. But when you work together and you've got the right people around you, it's pretty incredible what you can do. And as long as the culture focuses on the people and your customers, you can be pretty successful in this industry.

Tim Fitzpatrick
Thank you for saying that, because I talk a lot about slowing down to speed up with where we focus in the marketing space because we focus on building the engine. And the three components of building that engine are strategy, planning, and leadership. And especially in the MSP space, we just want to jump in and take action, right? We want to pick the parts and start assembling the engine. And with strategy, we're slowing down so that we can speed up later. Because when we skip it, we end up wasting all kinds of time and money, and we get six months, 12 months down the road, and we got to go back to it anyway. So guys, whoever's watching, listening. I did not pay Mike to say that, but thank you for saying it. It is very much in alignment with what I say a lot of times.

Mike Nastick
Love it.

Tim Fitzpatrick
Man, you know with your time at R3 that, grow in a business can be... Man, We take two steps forward, one step back. It can be challenging. Do you have any mantra or something motivational that you say to yourself or share with your team to help push through those times?

Mike Nastick
There's two things that I always say. One is zoom out. Sometimes you forget what you've accomplished because you're bogged down with the day to day or you're fighting fires for a week or what have you. And it's very easy for a negative mindset to set in. And so really just want to zoom out, take a breath, and look at all that we have accomplished. Yeah, it's a little rocky right now, but think about what we've done. And the other one is, I heard Jolly Roll say this at an award show, and it's There's a reason that the windshield is bigger than the rear view mirror, and we always want to be looking out the windshield. Just stay looking forward and don't look behind. You learn from your mistakes, you learn from your failures, and that's our mantra. We either win or we learn. We don't really lose. So there's a couple of things, like I said, zoom out and always looking forward. And the windshield is bigger than the rear view mirror for a reason.

Tim Fitzpatrick
I really like win or we learn. That's such a great way to think about it. And it's such a slight shift. It's a very subtle shift, but a really important shift because it on a positive mindset, which I really like.

Pivoting in Business by Focusing on Lenders

Tim Fitzpatrick
So Jonathan, I know you mentioned this, that you guys have had multiple pivots. One of those pivots was to focus on lenders. Let's dig into this a little bit. What shifted... What were you guys doing? And then what shifted in your thinking? And how did narrowing your focus impact your ability to market and sell more effectively?

Jonathan Brooks
Yeah, it's such a great question, something that, candidly, we've struggled with for a decade. So we started off as a very horizontal one to many type of a platform, and we were doing small business marketing as a technology. And so we were bringing social media scores and things like that. Oh, Tim, did I freeze? Oh, sorry. You're good. Okay, cool. So we're bringing social media scores and all that in and helping to curate a platform to help point of sales with online advertising. This is back in 2014. And to sustain that type of business, you need heavy investment and a lot of development to be able to serve one to many customers. And so we had access to 25,000 small business owners, and we were attempting to do things. But candidly, we were failing. It just it wasn't working. And we started discovering some concepts through the journey, which was, hey, these small business owners really didn't have a lot of opportunity to refinance their mortgage, to go buy a car, I mean, all the struggles that I had as an entrepreneurship, put your the business on your personal credit card trying to figure it out, right? And so we went from this concept of small business marketing. We had a couple of credit card fintech companies that we were working with. And we thought of this idea of, hey, how do we take the marketing concept and apply it really well into underwriting for a lending to a business owner? And so we did a little pilot, went out just shy of a million dollars of our own money to use some intelligent underwriting. And along the way, we found this company that we ended up acquiring that took us from a one to many approach to really a enterprise one to one level. And so that's a very short decade of experience. But what forced us to make those decisions is really capital. As a small business, you don't have infinite capital. You hopefully, you have profitable cash flow, or you have investor money. But the way to manage that, you have to be so surgical. And I think when you and I were talking prior to this, I sometimes laughed because literally, $1,000 to a small business owner is a lot of money. A $1,000 to others may not be so much money. And that mindset back to, how do you not come from a place of fear? It's a balance of, well, I have to invest and I go find my target customer. I have to invest in my R&D for product improvements. I do need to get to a market that's going to fit. You got to spend money to get there. So you got to really be clear on your resources. We were going through a lot of different pivot and shifts trying to understand where do we fall in this world. And literally, miraculously, we discovered this lending as a service space. And what we saw was there is not a turnkey lending platform out there for private lenders and smaller credit unions, smaller banks. It costs a lot of money to lend money and a lot of old antiquated technology out there, and we could really revolutionize this space. And so we went from trying to serve 25,000 small business owners to looking at, hey, how do we get to 100 private lenders who we can really superserve? And the old adage, the riches are in the niches. That not only for us as a business, it applies for our customers because we found really cool niche environments where lending money was needed. So that's how it came to be.

Tim Fitzpatrick
It's important for people to understand, too. You shifted markets, but you are also shifting your product entirely.

Jonathan Brooks
Entirely, yeah.

Tim Fitzpatrick
This was a huge course correction, which took a lot of guts to do, but you had to cut ties with what you were doing because it wasn't working. And so you went down this other path. Did you find... Once you made that choice to shift, how did that change your marketing and how you were selling? Did things become easier? What was that like?

Jonathan Brooks
Yeah. And it's amazing when you have everybody rowing in the same direction, what happens. In my almost little more than 10 years, we've never been more successful than we are right now. And the reason is because we decided to get very focused. So We had different subsidiaries, different products. We had, at one point in time, 100 people. And again, because of the decisions around cash flow management and needing to put capital resources towards the right product choice, we took a calculated but big bet on, stop trying to serve so many things, go niche. Now, our niche market represents trillions of dollars.

Tim Fitzpatrick
There's plenty of business there.

Jonathan Brooks
Oh, 100%, right? I mean, it's amazing. And so niche to me is not equivocal to small. Niche to me is focused, intentional, and you, man, if you can absolutely crush it from A to Z in a niche market, you're going to win. I think it takes a lot for an entrepreneur because you have... I joke, I have a really good friend, he's an entrepreneur. He always goes, I have a I have thousands of ideas, but not enough cash. I'm like, Oh, entrepreneurs. So yeah, I got it.

Tim Fitzpatrick
The thing that's... This is specializing and nicheing in a specific industry. It's certainly not the only way to do it, but it is a very simple way to do it, but it's scary for a lot of people. But when you do it, the power there is rather than saying, Oh, we're going after small business owners. Where do we need to go? The list is infinite. It's all over the place. Whereas when you go, it's lenders, it's private lenders. Then when you ask yourself, Where the heck are private lenders? Man, you get them. It's much easier to create that list, and it is a very focused list. You're like, Hey, private lenders go to these five events. They belong to these associations. They follow these people. All of a sudden, creating that list of where you need to go to sell and market your business is much, much simpler.

Jonathan Brooks
Well, and we're even going a little more, niche, on... And this, I think, is the shift for 10 years in the business. We're not doing massive pivots where we're ditching product. We're in a very intentional way maturing our product and our customer type so that we do better. And so when we do better, the customers do better because the product is more purpose-built for them. We're even evolving a little bit into the space of now we're going after lease to own, very specific within lending. If you're a furniture store, if you're a mobile phone lease, there's... In the US alone, there's like 20,000 different lease-to-own type of businesses out there beyond just furniture. Now we're even getting more specific on our niche. The really cool thing for us is that because for software, we're able to use economies of scale. So get into that market with a lower price point, lower cost to service that customer, and they see a huge benefit from it. And so it's all the things that as a business owner, you want to do. But it doesn't happen overnight. And it does take... You have to say no to a lot. You have to block out a lot. And that includes other business opportunities. Because those could be distractions.

Tim Fitzpatrick
It makes it much easier to know what your priorities are.

Jonathan Brooks
A hundred %.

Lessons from a Fraudulent Acquisition

Tim Fitzpatrick
And you eliminate the distraction. You're like, this is the focus. This is where we're going. I love that. I want to shift gears a little bit. You had mentioned you've had plenty of ups and downs as you built Business Warrior. One of those challenges was an acquisition that ended up being fraudulent. And there's probably a lot to unpack here, but can you just give us a brief overview of what happened and what you learned from it?

Jonathan Brooks
Yeah. So we ended up purchasing a company, and it is to this day still, I still have some PTSD.

Tim Fitzpatrick
I can only imagine.

Jonathan Brooks
From it. It was one of the hardest chapters in this journey of a Business Warrior. And so what we did was we ended up acquiring two companies in a short time period. One went really well, the other one did not. And in that one, we ended up finding that the core of the issue that owner and that CEO was just not a good person for us. I think that, particularly as business owners, you look to find your tribe. You look to find who you can partner up with to grow to that next level. I think while we did diligence and while we paid lawyers, I didn't trust my gut that at the end of the day, the business and that person was not really who they said they were. They passed three layers of checks, but that fourth one, which was my heart and my instinct, I knew something was wrong, and I didn't follow my gut. It ended up really wrecking us. We went through three years of health. Massive, massive issues of the product that we purchased was not what was not really built. The customers that we acquired while they had contracts, they all had separate side agreements It was a mess and a half that, look, I take full accountability as a business owner for the mistakes we made in diligence, which you always have to do. But I look at it and I just say, My spidey senses were going off, and I was too enthusiastic and too excited for the possibility of what could be to be patient and intentional and slow down. I think that that is the biggest lesson.

Tim Fitzpatrick
Were there things that you guys missed in due diligence, or was the information that you were provided, were they lying? Was it false documentation?

Jonathan Brooks
Yeah, I think it was a combination of a few things. I think if I were to weight it, I think that they sold a really good story and package, and they had small back steps. So what do I mean by that? It's like recommending two or three of your best buddies to give you a recommendation. There was nothing disclosed that they were your best It happens. But you find out two weeks later after you acquire, Oh, well, actually, we have this side relationship, or, Oh, there's actually... The challenge is that he was a serial liar. When you're working with a serial liar, and in business, I think, the sad thing is I'm not really shocked by very much after this experience. I grew up understanding and thinking that people were true to their word. In business, what's been clearly time and time again. Most people are, but the ones that are really great at lying, they will come the heck out of you. I do think, again, no doubt, there could have been different ways that I approach and my business partner and I approach the diligence process, which we could have slowed down. And this is where it's just that biggest lesson learned, the patience, right? But everything felt and sounded so good, and the diligence looks so good, and the financials look so good. But once you acquire that company and it's yours, all the skeletons come out. All those skeletons came out, and they came out really hard, really quick in a two-week time period. Again, the business was almost completely buried in two weeks. Thank God, we've survived three years later, and we've learned more than I'd ever want to, but I'm proud of what we've learned.

Tim Fitzpatrick
Well, I mean, everything's a learning experience, right? Good and bad. Yeah. So you had mentioned you guys had up to 100 people. How big is your team right now?

Jonathan Brooks
Yeah, so now we're at 18 now. 

Lessons from Going Public Right After COVID Hit

Tim Fitzpatrick
Okay, 18. And I'm asking that to preface this next question because you guys went public right after COVID hit. And I think a lot of people think public, and they think large company, and that's not the case. So I want to break this down a little bit. Why did you guys choose to go that route? And what have you seen? What are the benefits? What are the downsides?

Jonathan Brooks
Yeah, going public was very strategic for us, which maybe is an oversimplification of the whole process. But the reality is that we We were on to a good idea as a business, and we were starting to pitch different private equity and VC groups. And if anyone has this experience, you know the formula, which is particularly prior to 2020, prior to COVID. They wanted 70, 80 % of your company, and you would have some earnouts and you would have some opportunity, but you really lose control pretty much the minute you would sign the paper. Rett, who's my business partner, value Otherwise, it's not an ego or a control thing, but we do have a really clear vision of where we want to take the company and how do we execute on it. And honestly, we fought too hard to go give it to a VC or private equity group. And so we ended up doing a triangular reverse merger, which is very public company type thing. It's not a SPAC or anything like that. And we were able to raise a good amount of money from very public mechanics. So one of it is called a Regulation A, there's Regulation D. And so we were able to bring in about $4 million or so from the rates. We did that without having to sacrifice on our control. If anybody is looking to go public, number one, get a great SEC attorney. Number two, I'm happy to answer questions because I've gone through almost everything in the world around that. But in all honesty, it is a great mechanism to raise capital as a business, even a small business. Like you said, we got 18 now, right? It is a great way to raise capital without giving away control. You got to be careful. There are Tiger sharks and great white sharks in public markets. They will eat you alive instantly. But luckily, we've had a good We've had a good SEC attorney along the way. And so we've been really... Honestly, we've had a great investor group, too. We found one that has treated us well. And so that is also really hard because a lot of people will tell you as a... I think, unfortunately, now, not to go too long on this, right? Everybody, when you're getting pitched, they're all willing to tell you they're going to write you a 10 million or 25 million or 50 million check. The mechanics for how that 10 million, 25 and 50 million dollar check gets written is unbelievably important. And I think largely a majority of public investment bankers are betting that small as a owner doesn't either know about it or have the time or hasn't done the homework or is too focused on running the business. And they will take advantage of you. Those are some of the cons. It is a... You have to be on a high alert to be public. You also have to maintain your public records really well. Unfortunately, this is something that we've done. And again, we've been downgraded off of our tradable market because when we had the acquired company, it all went to hell. We had to make really hard cash decisions. So we decided to pay our people and to keep our product going, and we fell behind on our SEC filings. Inexcusable for a public company. Zero excuses. It's just we couldn't create money off of a tree. So we had to make those decisions. And I think as a small business owner, there's so many opportunity and pros to go in public, but you need to be eyes wide open through that whole process.

Tim Fitzpatrick
Yeah. Well, I love the fact that you mentioned, we got a good SEC attorney. You don't know what you don't know, and you need to have somebody in your camp who's guiding you through in that process. Because like you said, it was a better alternative for you than venture capital or private equity. But you can also run into situations with public companies where if you have somebody that owns a majority of the shares, and they can start to do things that I don't even know about. We all hear about hostile takeovers. Well, it's like, how does that happen? Yeah.

Jonathan Brooks
And I know other peers of mine that did get taken advantage of. They thought they were getting a $10 million check, and they maybe got a couple of million bucks, but they lost their whole company for a couple of million bucks. And it's sad. It happens way too often. I also think that the momentum of stock trading, particularly during the COVID meme, the stock meme of GameStop and all that stuff that happens.

Tim Fitzpatrick
Gamestop, AMC, take your pick.

Jonathan Brooks
Yeah. Yeah. I literally tell my friends, I'm like, hey, as a retail investor, you really don't actually know what's going on in the stock market. There is whole teams of people that know what's going on, and that's not the retail investor. That's not the guy trying to do option trading. And so my message is not, don't go trade stocks. It is just, don't think that you have an edge. There's really not an edge as a retail investor. But as a business owner, it definitely can be very, very, very, very strong pathway and journey to not lose control and still raise capital. 

Conclusion

Tim Fitzpatrick
Well, thank you for sharing that. Because look, you're the first person I've interviewed that's taking their company public. So I wanted to make sure you shared that. So moving forward, Jonathan, what's... I mean, you obviously want to grow. What are your what are your priority growth initiatives now?

Jonathan Brooks
So what we just talked about a few minutes ago, niche. Niche success. Let's get really good in this. So for us, our company is focused on three key items. So number one is we want to scale to a thousand LTO locations, least on locations in the next 12 months. And so that takes concentration and effort. And it's the four P's product, the four P's of marketing that you know so well on, and it takes on that. So goal number one is, how do we craft a no-brainer offer that is an absolute, Hell, yes, I'm going to sign up. And then for me personally, number two is, It's all around making the best product experience out there. And so you don't want to... We're not in the restaurant business, right? We're not selling sandwiches, which some people are successful in selling sandwiches. Sometimes I think about that. But we are a relationship-driven business. And so when that person relies on you as part of their financial arm of their business, your product has to be your flawless, if not flawless. Now, it's software, and you're always going to have improvements and bugs, and we can always fix them pretty quickly. But beyond the niche, it is how do we make sure that the product is, bar none, the best one out there? And then third is all around reliability and stability. We're on a recorded call right here with cloud and the Internet. And I guarantee you, if I picked up my phone, I'd have a little glitch, right? I mean, Apple has glitches. But again, if you're really focused in on being the best fintech provider for these niche markets, your product has to be 100 % reliable. And so that's what we're working towards. But to what we were discussing earlier, all of this is a lot easier than it was a year ago because we're Our focus. If you're trying to build the widget for this customer and try to refine a process, but our onboarding is specific to the niche, our language is specific to the niche, our product language is specific to the niche, our payments, our site. Everything is focused in a very mechanical way on making sure that we address the one-to-one customer. So if you updated the messaging on your website, specifically for Lend to own?

Jonathan Brooks
For lease to own?

Tim Fitzpatrick
Yeah, lease to Own.

Jonathan Brooks
Sorry. We're launching a lease to own specific landing page. And so I know, given this is a marketing podcast, we do a lot of A/B testing. And so right now, I would say 70 % of our advertising budget is geared towards general lenders who are working to come into the market or have a current portfolio. Our least to own specific, we have been testing concepts and advertising prior to overhaul any messages on the website.

Tim Fitzpatrick
Got it.

Jonathan Brooks
We're And I would love some opinions and feedback from you, too, right? But we are very systematic for how we approach new ideas anymore. We don't just throw them out there and be like, oh, great, we're going to go do this and this and this. We test them in almost an incubation style with our digital marketing campaigns. We get some alpha and betas on the platform, make sure that it's good, and then we move forward. So we will be updating the website for the least to own niche, but we're being, again, very intentional about it.

Tim Fitzpatrick
Yeah. Once you get the data you need to feel confident in what you're doing.

Jonathan Brooks
Well, yeah, because we don't have trillions of dollars to do three years of market research. We get 30, 60 days of market research, and then we've got to quickly adapt. I think that's always the beauty of, again, it's never about slowing down in order to try to leap forward later. It is how do you balance the speed and the patience to hit your goal and not miss because you can't afford to miss.

Tim Fitzpatrick
Yeah. It's been fantastic, Jonathan.

Jonathan Brooks
I appreciate it.

Tim Fitzpatrick
One last question, man, knowing what you know now, anything you would do differently?

Jonathan Brooks
Yeah, I thought about this. I actually talked to my wife because she's been my ride or die, and it's hard for it. It's 10 years of really hard, hard, hard work and great days and dark days. But In full candor, I wouldn't trade anything. Not a single thing.

Tim Fitzpatrick
Part of the process.

Jonathan Brooks
Every microelement have allowed us to be like the Hulk. And it is... Transformation is not easy. It's not fun. But I want to change a thing. So that's not me being cliché. I'm being dead honest with you. I want to change a single.

Tim Fitzpatrick
Cool. I love it, man.

Jonathan Brooks
Where can people connect with you? Businesswarrior.com. And again, very open on LinkedIn. If you have questions, whether it's the Fintech space or the public market space, super happy to have those discussions with anybody. So, Tim, I appreciate it. And I'm Looking forward to hearing more and also getting your feedback on our company. So I appreciate it. Yeah. Awesome.

Tim Fitzpatrick
I love it. Well, thank you for doing that. We will make sure that that info is in the show notes, but businesswarrior.com, and search up Jonathan Brooks. It's actually Jonathan Books 32 you. So we'll make sure that's simple for you guys to connect. Jonathan, thank you. Those of you that are watching and listening, appreciate you as well. If you want to connect with us, you can do that over at rialtomarketing.Com. The other resource we have is over at revenueroadblockscorecard.com. When we help clients build their marketing engine, we focus on nine key areas. If you want to know which of those nine areas are slowing down your growth, that's where you can do it. And so go over, check it out, less than five minutes, and a bunch of good stuff for you over there. So thank you again. Until next time. Take care.